Diary of a Dumb Investor: selling my way into an ugly 2012

I lost the password to my old account and just hit the keyboard at random to create a new user name!

Well now DI you have certainly reassured me that

A - the market will go UP this year and B - that it is a good time to invest in solid shares. Quite the contrary to what you forecast will happen. Your comments during the last year have convinced me that taking an opposite view of your forecasts will certainly pay off and that as before Hargreaves L. are the only beneficiaries of your actions. I do hope that they treated you well with Christmas goodies. I very much doubt that you will "prove to yourself that you can be an astute investor" as you suggest

Happy new year! Mr Investor.

All the best. Sure you will come good this year.

All I would say is that you should be careful what you wish for. If the FT goes down to 4,000 where will it stop? This will create a situation where companies will find it impossible to raise money through issuing paper (this is partly what QE is being used for). The FT struggled to fall below 5,000 last year and this is the critical level. Buying at this level is what the experts are doing!

Your last piece where there were so many negative investors made me think that this is a buying opportunity. When everything is so bad, markets have already factored in the bad news. However, if the US invades Iran etc all bets are off.

I still think gold is the best play. Selling gold will be the bet of the year but I might be too early for this to happen but with all bubbles they do come to an end it’s all about timing

How can you (or any of the other pundits) have any idea where the market is going this year?!

The only way to invest is to decide which companies are under-valued by the market, and then invest accordingly.

Yes, the markets may well go down further but you're at least holding shares in companies which have value. That will (eventually) be recognised.

The very nature of the Jupiter European Opportunities Fund is to exploit these anomalies, finding under-valued companies and investing in them. because of the euro, there are loads! And because of the euro, the market in them will fall further still! Ideal for traders.......useless for investors!

I'm keeping a weather eye on Personal Assets Trust. When they start selling gold, I know the time has come!

My 4000 figure was perhaps tongue in cheek, but we were there just a few years ago, and I feel that coming month have plenty more bad news to come. However, during August I was buying at around the 5000 level, and I've got that as my "button pushing" point for next time.

The big question is what percentage of cash to hold back? I've never been much of a believer in "opportunity pots" but this year seemed different.

All the best for 2012 Mr Investor.

Hope you have a cracking year!

I'm stuck with Lloyds too - but confident they will come good and maybe even pay a dividend this year! At the current price, they have to be a bargain, so I have more than doubled my holding for less than half of what I paid for my original holding! I'm only on a 38% loss now!!!

I think the Americans will not be able to resist attacking Iran in their ongoing crusade to save the world (by bombing it into submission). I have requested that Obama be stripped of his Nobel Peace Prize, which he was never entitled to in the first place.

@Muffeiy You may want to consider the construction/house building sector this year. Most of the companies have gone through the pain of 2008-2011, and taken action to prepare themselves for another 2 years of troubled economy.

A New Year, but still the same sarcastic and belittling comments. Well, I hope that 2012 works out much better for you than 2011 anyway. Happy New Year.

I have been very bullish on Afren over the past 6 months, however, your choice to sell may be the correct choice. I have also taken a healthy profit from them this morning, purely because I think that they will return to the lower levels seen recently. But I only sold half of my holding, crystallising some of my gains, rather than dumping the stock altogether in case I am wrong, and the momentum continues. Perhaps this is what you should have done. You seem to go all in, or all out, and never really reduce or increase holdings over time. This would indicate that you were 100% convinced on AFR at the start, and now you are 100% NOT convinced with AFR. This is still a good stock in my opinion, and if I were you, I would buy back in at the earliest correction...... if there is one. At least I am still in of there is not one on the horizon. This is perhaps a strategy you should consider. I adopted the ‘s**t or bust’ trading technique when I was learning the ropes.... but I got away with, more by luck than judgement. Now I am wiser and know better.

I agree that the markets are going to have a rollercoaster 2012, particularly Europe, and it would not surprise me if this year also closes lower still. So the plan is to sit in cash, have a punt on a winner, or short the markets. Once again timing is crucial and this is what you need to work on. The stocks you have held over 2011 have not been duffers, in actual fact I have held or hold most of them (even LLOY), and all but one are showing a decent profit, even my loser is minimal (XTA). It’s just your timing dude.... it sucks!

Let's be fair, 2011 was a difficult year for everyone. I sold my bonds down too fast and too early, but so did many others. I started rolling back into equities too early, but so did many others.

I even bought some Lloyds at mid 30s, but only a fraction of the Lloyds and Nat West prefs that I picked up at bargain prices, and which I expect to come good for double digit yields.

Forget being an "Also Ran" at this Game and Stick to the 5am Roman Tanks : there you're guaranteed 2nd Place.

I have to say that my jaw dropped when I read that you had just sold AFR. With a daily production rate of 50k bbl, and mkt cap. of £ 1 bill, the cost/bbl/day is just £20, which by any companison with other oil producers, both big and small, is really cheap. Add to that the 2012 production upside potential and I would suggest that a price range of £1,35 to £1,65 is certainly achievable this year, probably quite soon. We'll of course have to see if my opinion is correct, as time will surely show.

I'm not buying anything as I'm in a decent financial place. But I'm glad that DI has reconsidered Absolute Return Funds and has by inference retracted his "Absolute Idiot" remarks made in response to one of my comments at the outset of this interesting series. Of course, these funds are not everone's cup of tea but in these unstable markets the degree of loss and risk is likely to be minimal. All the risk DI needs to take at this time is tied up in his Lloyds holdings. These alone are sufficient risk for anyone in these uncertain times.

As for gold, I would buy at this time. I forecast gold to be up to 2500 dollars an ounce by the end of the year. You heard it here first.

I quite agree. But it is all about keeping your finger on the pulse (to the point of obsession), moving with the markets, following your convictions, doing your research and holding a strong stomach. Fund managers are a waste of time and perform no better than a reasonably educated home trader. They are expensive, quite often don’t beat the market, and then make up a lame excuse as to why these cappuccino swillers have got it wrong again. And let’s face it, most of us trade for the thrill and excitement as well as the profits. Buying funds are nowhere near as much fun.

Make it your new-year's resolution to read the works of Buffet and Munger.

Hi Mike88 - Gold at $2,500 by end of year? Just to be contrary i reckon it will struggle to be much more than $1,500 - I sold most of mine at c$1,800.

If we were residing not too far apart, and i have no idea, I would bet you a pint of the best ale that my forecast is nearer than yours at year end. One thing is for sure - it will be a bumpy year for Gold pundits. I would also bet that DI was most unwide to sell out of his Barclays so soon after having invested in them

Er - so you hadn't noticed that Jupiter European Opportunities had started to move up again - up 2.16% today . . . . . .

What did your great-uncle say about your first year's efforts? Did you get the next £10,000?

DI doesn't seem to have decided whether to be a trader or an investor.

Rufus Dogg is right and you can add Jim Slater and his "Zulu Principle" to Buffett, etc.

I like Newton global higher income and Asian income. Both have good dividends while waiting for the markets to change up a gear. Seem less volatile than a lot of funds.I think also if you constantly buy and sell you will never make much money as you seem to over worry about short term volatility. Thoughts?

Neal ...............I'm heavily into equity income funds - I hope you are right in your belief that dividends are the way forward in these choppy times.

Brian suggests Jim Slater's Zulu Principle as a good read. It is.............. but the problem is that so much research of PEG is required you lose the will to live.

Neal - I am happy with Newton Global Higher Income too. I am concentrating on good dividends & also hold Kames High Yield Bond. I am researching Newton Asian Income ready for next ISA purchase.

The compounding of dividends over the years if you reinvest really add up.

Glad to know I am not alone in this ... Patience is key I suppose. Regarding jim slater. His son is a chip off the old block and runs some very good funds. Always top decile.

DI, Happy and healthy New Year and may you prosper.

The present market makes no sense with all the prospective downs, impending depression/Euro debacle.

I am sitting on my cash, but am pleased with pleased with Afren.

If it drops again to 75p I am in for a few more, but that is unlikely.

The DT had a sell on it, http://www.telegraph.co.uk/finance/markets/questor/8938660/Questor-share-tip-Three-battered-oil-companies.html , and then I discovered it has a fairly high level of debt, 50% to capital. But not for the first time Questor has called it wrong. But I do give their tips some serious thought and have had a number of 'winners' from them. They are not the oracle, but have missed out on some of their better suggestions (no money to spare).

As to the drop you talk about, (whilst I agree likely) that is going to require patience, strong nerves and the will to stand by your decisions.

By now, you should have begun to get some idea about the market. If you miss one bus, another will come along soon. Remember, cash is king.

Good luck.

"Today I dumped two of my badly performing holdings, in the belief that markets are only going to go south this year."

In that case why aren't you shorting the index? Or hedge your bets and be long on the equities you think will do best and short the index?

Lets face it with HFT etc the markets MUST be in balance so are just as likely to down as up. IF you can wait long enough, and not run out of cash or nerve, eventually you will be in profit. (Unless your chosen Co. goes bust)

Don't worry DI, i too am an amateur investor/trader (i don't know what to call myself) and have made a substantial loss in the last two years of my 'gambling'. However, i don't see this as lost money but rather see the money i have spent as a price to pay to educate myself. Maybe this education i am receiving is a little overpriced in some eyes but you get what you pay for. The more i lose, the more i learn from my mistakes. As a result of the education i have received through my gambling, i am gradually moving away from gambling to profiting. We learn in life through trial and error. If we don't make mistakes, we become complacent and think we don't need to learn. If we didn't take risks in life, we wouldn't have many of the great inventions we have today. Yes, i have lost a lot of money but i have gained a wealth of experience and that wealth of experience will reward me some day, with the return of my losses and probably more. Either way, we shouldn't be too avaricious otherwise you miss out on all of the good things in life. This is not advising people to rush out and gamble their money but rather is to advise those like DI not be so tough on yourself if you make 'losses'. Those criticising DI for his unfortunate investments, don't be too harsh. He, like myself, was not born with a knowledge of how the markets work but he, again like myself, will learn. Happy new year to all and DI, i will be observing to see whether you or i lose/gain the most this year - happy investing!!

I will stay away from Lloyds, there are better businesses to buy out there. I don't think all the loses from HBOS have came true yet. 2012 will be a chalenging year for banking, I expect a few European banks to go under or to need governement support. Japanese banks needed 20 years to comeback from their credit crisis. Now these Japanese banks are waiting around the corner to buy good banking assets at cheap prices. Saying that I expect Scottish Widows to be put up for sale.

Is this a value investment or a value trap. As value investors we merely look for asimetric pay off. All I can see is is very little upside and lots of downside, probably it is time to short again to make some more money on Lloy.l . Where is the price of that put option, it should be cheap today as investor will think Lloyds will sky rocket :))

Ryan, would you care to share some of the lessons you have learnt? Like holding on to dud investments too long OR selling low, when holding on would have come back to profit?

DI don't worry about losing money - you started at a very difficult time - how have you done compared with say the FTSE100? Even nearly all of the professionals have lost money (and charged you! so they do very well personally) - and those that have not will mainly have got lucky and could just as easily lost big time.

Anyone care to name any investments (other than a BS bond) that has done consistently well in good times and bad, and is certain to not lose in the future?

DI,

"Today I dumped two of my badly performing holdings, in the belief that markets are only going to go south this year."

Wrong call once again as I see opportunities in the bond market although the cycle of money will remain tight.

Personally I expect a lot of fine tuning when it comes to currencies all across portfolios while inflation will remain biggest risk factor in the overall sector.

For me once again growth remains a game of balance as economic cycles and policy judgements will be main investment clues when it comes to opportunities in the market.

First half very challenging but will respect trends utmost while after that who knows apart from play defensive.

A comeback in 2012 - 50/50 that is the honest answer!!!!!

I think you are right to go for absolute return funds. Only a fantasist would believe that the markets are going to rise over the course of the year and little point in keeping you hard earned money in cash. After all you can cash in or swap a unit trust in two days.

Have opted for Cazenove UK absolute target and Liontrust European absolute return, up 10.7% and 7% respectively and both listed in the Hargreaves L "wealth 150". Good luck and HNY to all investors.

I think volatility is here to stay for at least the next year, what I can't understand is that something nasty is almost certain to happen in the Euro area before easter, why is the market going up, I thought it was supposed to foresee these events and build them in to the market price. Greece is due to run out of money by April and Italy has huge loans to renew.

Thank you Anthony Tinslay for your comments on my throwaway gold forecast.

If you feel the price of gold will end the year at $1500 an ounce then you must be reasonably optimistic for 2012. Good on you as optimists are difficult to find at present.

I'm an habitual bear and feel that markets will not recover to their 1999 levels for a few years yet not unlike the situation in Japan.

With further troubles yet to be exposed in euroland particularly in Italy, Spain, Portugal, Ireland and even France coupled with Greece possibly withdrawing from the single currency I remain pessimistic. I can't help feeling Italy is a far worse basket case than previously thought and if that country goes under markets will collapse. All this, coupled with a possible oil crisis and worldwide political uncertainty, leads me to the conclusion that demand for just about everything will fall through the floor making it difficult, if not impossible, for companies to prosper anywhere not to mention the inflationary effects of an oil price hike.

As a consequence I believe there will be a flight to quality and gold in particular. Maybe my $2500 year end forecast was overly pessimistic but I bet you a virtual drink that the year end close for the price of gold will be nearer my $2500 than your $1500.

Will I buy gold or mining shares? No. I'm happy with my low risk dividend yield portfolio but if I were to buy anything in 2012 it would be gold and the sooner the better..

We shall see.

Gold as with anything is just as likely to go down as up, (or up as down to be PC).

Check out postings like

http://forexforums.dailyfx.com/commodities-gold-silver-oil/61025-oil-gold.html#post1010830

I get the feeling that gold has (unusually) followed the markets recently, due partly to the (banks) need to raise cash as other investments fall, now that has been substantially done for those in that position (not India or China for example), and as fiats collapse and perhaps the $, then gold may well soar as a rare protector of wealth. But who knows? I see more upside potential than downside. But it will be bumpy. $1400 just possibly 1200 v 1800 to 2400, now at 1600. Exchange rate are a big factor of course.

Chris Marsden - I will give you one share to fit your criteria AND I do not hide behind anoniminity. I have mentioned before - ALBEMARLE & BOND. A Company valued at c£175m on the AIM market. Pawnbroking is one business that thrives in uncertain times - current price is c335pence and I have been a sharehiolder since inception in 1988. Profits and Dividend increased is each of last 20 years I believe. Would expect transfer to main stock market when capitalisation in excess of £240m.

Mike88 - you are on with the virtual bet

I think that the dollar will be one of the events of the year and increase far more in value than analysts think. I also do not think QE3 will start again in the US either. This is all bad news for Gold.

I think that Europe will muddle through with the back door QE to the banks that will then purchase the bonds needed to keep the PIGS alive. I also think that gilts are overpriced!

This is why the markets are going up along with so many people in cash and gold. When everyone starts selling gold- what do you buy?

This is my opinion and things can change overnight but this is how I see it.

I would buy high income equities!

The gold bull is over!

Gold price end of year $1,000 or lower. When gold goes down is does not just fall it crash's. Check the long-term history of gold. Safe haven not a chance- speculation certainly!

The truth is no-one really knows which way things are going, however the reality is likely to be a very bumpy ride for the next few years no matter what you choose. Many valuations seem to have been based on overly optimistic earnings? We are certainly not at a bottom here are we? But then to confuse matters we have all the money the banks have been gifted, but I guess this will be short lived as it all sloshes down the debt hole?

Looking for extreme value like Buffet is about the only safe way to go. For that of course, you have to wait for somewhere around the bottom, wherever that is and whenever that will be? That is about as safe as it gets?

Chris Marsden - I started parting with some of my money to the stock market approx. two years ago and being honest, this was a novel venture for me. I had no knowledge of markets whatsoever, even the basics. I have learnt many lessons from my experience so far...1. Don't believe the exhortations provided by 'experts' but rather one should circumspect before parting with their money - i was naive enough to believe these people knew what they were talking about virtually 100% of the time (as their exhortations purported). 2. Make decisions based on logic rather than emotions - too many times i have bought at tops and sold at bottoms. 3. Don't be greedy - i got carried away with double shorting ETFs (sorry, i have to laugh at this point). Rather than exiting when i lost a certain amount, i would hold on just hoping for that turnaround - that turnaround never happened, until of course i exited, then they'd go shooting to the moon. 4. If you lose money, it's not the end of the world!

Perhaps we should contemplate from where the good news is likely to come and more importantly when. Most, if not all of us, are pessimistic about future prospects so are we all mad for holding or even buying shares when there seems no end to current or even forseeable future uncertainties?

Did anyone make money last year or are we guilty of exaggerating our gains and reticent to discuss losses?

That aside, this series of articles by DI mirrors almost entirely my early experiences of share dealing - namely losing money and taking risky bets to recover losses with my portfolio value spiralling downwards. Thirty or more years on I've learned to do things differently and made most of my gains from property and long term share ownership but that's another story and certainly different from DI's philosophy. However, if there are any inexperienced investors following this board I would strongly suggest they exercise caution.

I agree with Chris B's assessment about the propensity of gold to crash but conversely gold rises as quickly as it falls so that is one investment that I would not hang on to for too long.

Chris

I won't be so cruel on gold. One of the things I learned investing is not to try to forecast. Some things are obvious - like the sovereign debt in Europe but even there we may have surprises in the sense it may not be so bad as we think it is.

Better look for 'value' and believe me there is plenty around. As value investors we need to look for asimetric risk reward trade off. There should be a 'margin of safety' but in Loyds case there is no one.

If I believed Loyds is a good value because it trades at 60% of the book value, I Iwould buy some junior bonds issued by the bank not equity. It trades at around 78p in the £1 and it gets paid before an equity investor in case of liquidation. With junior bonds I am geting paid a woopping 11% yield for holding it. For holding a share in Lloyds there won't be any dividend for years, only an opinion.

In my oppinion the Lloyds Bank situation is so poor, that even holding a bond I may not get paid and I may be offered equity in exchange at redemption so I prefer to look somewhere else.

Ryan, thanks for that. These people have a mission in life - to "make" money. That is an oxymoran. You do not "make" money in the markets, you WIN it from someone else. They are experts at extracting money. gold and silver are highly manipulated markets. it is not chance that it creeps up, lulling more people into it, and then drops very suddenly. So easy to buy when it has gone up, then sell low.

If DI buys £1000 of Lloyds, It is 50/50 whether it goes up or down. Only look at past performance which way is most likely - what has changed? - yet even THAT is built into the price!

It goes down 10% and perhaps he sells. He has lost £100.

Perhaps he holds and eventually comes back to £1000 and is so happy he sells losing only his dealing charges.

Or perhaps it goes up 10%. Is he going to sell at +£100? NO of course not he wants more. It then goes down and sells at zero. Or holds on and it goes negative. Hold for 5 years yes it MIGHT make money. but now what was FTSE at 10 years ago?

It ain't easy to make money. Those with the best news, analysts, fast megacomputers, and vast funds (with risk control ie hedging) to withstand the losses can make money, for themselves, and, after charges a few peanuts for their backers. Heads they win, tails their customers lose they have to just make do with the fees.

Cynical? Me? You bet!

Doesn't matter if you lose money? Well it depends if you have ample to spare. Don't gamble with what you cant afford to lose, DI. You are OK, you have £10k, when it's gone it's gone. You don't HAVE to be fully invested, know when to stay out, we are pretty certainly not at the bottom, but no one knows where that will be are we 2% or 50% from the bottom?

Chris M

There should be a reason when you invest in a stock, there should be value there an a margin of safety. You should also have a target where you will sell that stock and a reason for that target.

Follow the Deutsche Bank UK CROCI index components, it helped me get lots of winners. A good idea is to buy the CROCI book by Pascal Constantini, it explains how to value a share using the 'economic profit valuation' and how to get 'good businesses at fair prices'.

In the meantime stay away from banks, insurers, retailers and building industry. These are companies who make profit on leverage and now deleverage is the most loved word.

mike88, "Did anyone make money last year",

Yes and no, paper capital losses not good, but dividend income fair (including a special dividend), and remaining the same this year, to be about on a par with last year but no special dividend, so divis rose this year, 15% .

But then on the capital side of things, I have seen the falls recovered, and expect the same again and if some of my current dogs recover, and my speculative investments do half well (and the pundits would seem to suggest they will), I will be quids in by the end of next year, if not this year, with better prospects as the markets improve, over the next few years.

DI, Afren, o h dear!

Snoekie...... I warned him about that itchy trigger finger a few weeks ago. Although I am a little guilty here too, having offloaded 40% of my holding yesterday. I am still in though, albeit, I am giggling rather than laughing.

Stick with it DI, you'll get the hang of it. 2011 was a good year for me, and if I can learn, anyone can.

AFR again! A good measure of value is to compare the capitalisation divided by the daily output against its peers. In this case, a market cap. of around £1billion divided by 50kbbl/day yields a ratio of £20/kbd.(Call this the Gubbo measure!) This is MUCH cheaper than most ,if not all, its peers such as TLW ,Dana, PMO and the like. Questor was also concerned at AFR's ability to service its considerable debt. At 50kbd, and oil at $100, AFR is probably spinning cash at about $40/bbl, so it is generating around £1billion/day. Easily covering any interest bills. And then some!

Crazy, I have better hopes for Afren, even if it drops in the coming weeks.....

Just been watching one of the most interesting You tube type vids I've ever seen.

http://collaborativefx.forumer.com/

Chilling. Long. but it very clearly shows how DI is a gambler trying to make money from trading. For every £ you make, someone looses a £.

An investor makes money from the DIVIDENDS, any share price increase is a bonus windfall.

They guy is normally a trader in the pit, in a bull market he was making good money mainly by shorting, as most people go long only. In this bear market of course he can make far more.

Well worth watching the lecture he is giving. Yes thats where he makes his money, but likes to do 'education' for a break.

DI is his fodder.

Why on earth sell is a downward market? This is the worst thing you can do. I would have waited until break even point or even a small profit to cover the broker's charges. Now I know why you call yourself the 'dumb' investor. Only BUY in a depressed market and SELL in a rising market!!!

Ivan, Investing is not always in Primary Colours.

Whilst you are right in one respect, if the price falls, you don't want to sell at a lower price, but take DI's Lloyds shares....

Today's DT says Barclays Cap report that Lloyds and RBS could be hit by a FURTHER £33bn writedown this year. If they need bailing out, what does that do for us shareholders? There comes a time when bailing out IS the right thing to do. A 25% loss can turn into a 95% loss - or more.

Yes I bought a few Lloyds when it was already depressed and started to rise, so I am only down 10%. When they drop to 5p I may buy some more. But even that is a gamble.

Chris Marsden - I know all the arguments about dividends - but if, like me, you have a SIPP in drawdown, just concentrating on dividends can be disastrous.

Say you invest your £100,000 pot in companies paying good, reliable dividends - for example Aviva, Tesco, Centrica and BAE Systems. The dividends come in and pay your drawdown of (say) 6% a year, with a bit left over. So far so good. But over five years the shares drop in value by 12%. At the end of five years you have to recalculate the pension you are allowed to draw, using the Government Actuary's Department's tables. One of the factors you put into the calculation is the current value of your fund. This has dropped by 10%. Your monthly pension will also drop, perhaps not by the full 10%, but enough to notice.

If, on the other hand, you invest in growth shares like Ashtead, Weir and Fenner, you may well find that at the end of the five years your pot, even after taking pension out of it, has risen in value by 40%. Your pension could rise for the next period (now three years).

Well, I know what I'm doing . . . . .

Yes no argument with that strategy. But you missed BP of your good dividend payers. Oh dear. Life can be a bitch. Then you die !

By going for growth you are doing some investing, some gambling. You can't look at one without the other. But long term holds on good companies should work. But not very exciting.

Chris - Yes, BP is a good solid company which never has any industrial accidents or spills any oil into the Gulf of Mexico . . . .

And since when has collecting dividends been exciting? Like watching paint dry . . . .

Yes that is what I meant. You plan carefully, but still see your hopes dashed by the unexpected.

DI is gambling but I am not sure he appreciates it, it certainly isn't investing. Nor profitably. BTDT etc.

Maverick seems to have discounted the possibility of his growth shares losing money. Dividend shares might not be that exciting but excitement is the last thing I want when investing especially as I rely on my investments for income.

Mike88 - I don't discount the possibility of my shares losing money - but I do pick them very carefully and monitor them frequently.

But I am very well aware that if (e.g.) Aviva shares give me 9.4% dividend in a year, but their share value drops by 23.7% (as they did last year), from the pensions point of view I have lost 14.3%. That is not what I call an investment, though you are perfectly at liberty to call it an investment if you wish.

I just think there is no difference between income and capital gains - it's all money. At the end of the day your bank account doesn't care where the money has come from.

Maverick - Many people pick their shares very carefully as well as monitor them frequently including DI - and look how he has performed. Picking shares and monitoring isolates nobody from losses.

The main focus of my comment was your reference the lack of excitement in high yielders. Excitement is not a word many people would associate with investing although I do agree with your latest comment that there is no difference between income and capital gains.

Where DI has failed so miserably is that he has not introduced any kind of stop/loss system and has committed the mortal sin of selling his better performing shares and hanging on to the losers in the forlorn hope that losses can be recovered. Some suggestions on earlier threads that he should buy more shares in Lloyds to lower his average purchase cost seems to me to be bizarre in the extreme but what do I know as I've only been investing for the last 25 years.

The net result of this is, there IS a difference between investing for Dividends and gambling on share values going up.

IF you can make money, then it doesn't matter - the profit is just as good.

But if you buy a yo-yo like Afren high, sell it low on a stop-loss, and naf divi, then you are likely to lose. If you (are lucky or possibly skilfull enough to) gain, someone else has to lose.

If you buy a good long term hold for the divi, then picking the right price is not AS important, and nor is the selling many years later, It is still likely to be higher. Less 'exciting' but the money paid in divi is earned by the company, and you are not 'betting' against other punters 'losing'.

Horses for courses. A lesson for DI, me and some others that haven't been doing it for 200 years.

Lloyds WAS a good hold, until they became gamblers (like all banks) and came unstuck.

May be nothing wrong with speculating, with proper risk control and full realisation of what we are doing.

Chris - Someone does not have to lose in any transaction. Back in the days when I was a company/commercial solicitor I set up a joint venture company to move truck trailers around in a port on the South Coast. I knew one of the two ferry operators was making nearly five times the saving of the other - but although the other didn't know that, it didn't mind, as it was still making a substantial saving.

The seller of the shares you are buying may still be making a good profit on the deal, and may need the proceeds for a very good reason.

I still think buying shares when the price is still falling is complete idiocy. If you just have to buy those shares, for heaven's sake wait till they've started rising again.

Although possibly a slight generalisation, those who play the market, trying to buy low and selling high, IF they make a profit, is virtually 100% at the expense of others who have lost.

Dividends are totally different. that is from profit, from efficiency savings, innovation, investment etc.

A simple fact of life. It is what makes a market, so in a capitalist society it is the way it works. I am not passing judgment on this in any way. Playing the market does not actually produce any goods though! Let's be clear about this, or agree to disagree?

You don't know they have stopped falling until after the event. Ever heard of dead cat bounce?

High Dividend share have done far better than growth shares over the long-term and this has been shown from UK and US data.

The main reason is most growth stocks already have much higher PE ratios which they cannot deliver on. In the long term it is a value strategy. Cash cows with some growth such as Glaxo do not have too much to achieve and so do not disappoint. They also give out lots of cash instead of investing it unwisely.

Growth stocks tend to over promise and under deliver. The trouble is if you can pick a Google or Microsoft in the early days you can make loads of money but these are quite rare. All growth stocks actually will always run out of high growth eventually when they either go bust or become a cash cow. Becoming a cash cow by definition means that they will be valued on a much lower PE.

My own opinion is with Chris that high income shares (very high dividends share excluded because these shares have a high risk of cutting the divi or going bust (Aviva)) are far less risky and speculative than growth stocks and have been found to outperform growth stocks over the long term.

growth share could be taken over and make you money as well

OK you guys, like I said, I know all the arguments about dividends. All I can say is they've never worked for me. I'll buy my Weir Group and Dialight and Micro Focus, and you can buy your Tesco and BAE Systems, and let's agree to differ.

Well done DI, you just sold the Africa's answer to BP I think you will be kicking yourself in 20 years...

What are you going to buy with your cash when you have another whiplash u turn in a few weeks? UK banks?